ECB and Euro rates: how low can we go?
In a historic move, the European Central Bank on June 5, 2014 cut interest rates and confirmed it would embark on a broad range of measures aimed at stimulating the Euro-zone economy.
Although the scope of the above measures exceeded most market participants’ expectations, the market reaction has been muted so far, perhaps as investors await US employment figures. The ECB has sent the resounding message that it will continue to take the necessary measures to combat low inflation and deflation in certain Euro-zone countries. In addition to lowering rates across the board, the bank committed to making cheap loans on the condition that banks lend more to the private sector (the take-up at the first two of eight operations is estimated at EUR 400 billion). The ECB also indicated it would intensify its preparation to embark on quantitative easing measures, purchasing asset-backed securities at a date to be announced.